Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Thursday 3/31/16. Intraday Market Direction: Nasdaq

The index climbed by 0.5% or 22.67 points. Since 02/05/1971 the index made 516 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.9% on 358 occasions.

Average loss was -0.8% on 158 occasions.

Expect the index to close higher 69.4% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 103/176 or 58.5% of the time.

The prediction of the index closing lower has been right 34/72 or 47.2% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

The chart pattern shows an ugly double top. I haven't studied these, especially on the intraday charts, but look for a peak such as that at A. A lower peak, B, should
follow A. Together, it's a double top with the right top below the left one.

It will confirm as a valid chart pattern when the index closes below the horizontal red line at C. That hasn't happened yet, so all you are looking at is squiggles on the chart.

If the index were to drop and confirm the double top, then it could drop as far as D, the launch price. I don't know what might cause such a drop, but it's possible.

If the index moves above the top of peak A, then I would expect a strong move higher. That would signal a resumption of the DA move.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Wednesday 3/30/16. A Look At Indicators

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

This chart shows a surprising turn in the indicator. It has jumped upward from the recent low of just a few days ago.

This suggests bullish strength and a continuation of the upward move. Whether that is actually true, we will have to wait and see. The indicator can reverse quickly, too.

The red line is the percentage of stocks at least 20% below their 1-year high (plotted upside down). The blue line is the average percentage drop of stocks below their 1-year high (plotted upside down).

Shown as a red line on the above chart...

On Monday, 46% of stocks in my database are in bear market territory (down at least 20% from their 1-year high).

A week ago, it was 45%.

The fewest was 19% on 04/15/2015.

And the most was 70% on 02/11/2016.

Shown as a blue line on the above chart...

The 540 stocks in my database are down an average of 22% from their yearly high.

A week ago, the average was 21%.

The peak was 12% on 04/15/2015.

And the bottom was 32% on 02/11/2016.

This chart shows that the stocks I follow have weakened slightly from the prior week.

Although the prior chart shows strength, this shows that stocks haven't responded to that strength. You can think of it as the CPI being overly sensitive and this indicator is sluggish in
comparison.

If you look at the wide trend, it appears that the downward slope so prevalent since last June has changed to an upward tilt. I show this trend with a green trendline(s). Notice how
the two indicators have risen above that line in the last week or so.

Even here, caution is advised. Notice how close to the green lines both indicators are. That could mean the indicators have reached overhead resistance and will reverse soon.
I wish I could be clear on a direction, but I thought we'd retrace more than we have. The prior chart shows strength and this one shows weakness from the prior week. Good luck discerning a direction
from that.

-- Thomas Bulkowski

Tuesday 3/29/16. Intraday Market Direction: Dow

The index climbed by 0.1% or 19.66 points. Since 10/01/1928 the index made 1280 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.6% on 657 occasions.

Average loss was -0.6% on 623 occasions.

Expect the index to close higher 51.3% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 110/185 or 59.5% of the time.

The prediction of the index closing lower has been right 29/57 or 50.9% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

Notice the looping curve at A. It's a chart pattern called an inverted and ascending scallop. I was going to call it a rounded
top, but this is a better fit. The starting anchor (where the pattern begins) is lower than in a rounded top.

Look at B now. This is a smaller version of the larger one at A. I've seen them come in three, where each successive one is smaller than the prior. And that leads to a trend reversal.

Usually, though, B forms above A, not inside it like that shown here. I'm not sure if that's significant or not.

If it breaks out upward, then look for another looping curve like B.

A downward break could take the index down 100 to 17,400. Maybe below that, but it should at least pause there.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

My Prediction

This is a picture of the best performing index (year to date) out of the five that I follow.

Notice the nice uptrend it has been in since the low in mid December.

To emphasize the trend, I drew two up-sloping channels, shown here in red.

The index is at B, near the top of the channel, moving sideways to down.

Could it drop to A and then resume another move to the top side of the channel? That's a possibility which I show with the green line. The retrace coincides with the chart pattern
indicator turning bearish several days ago.

A Brief Look Back

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday:Up 21.57 points.

Tuesday:Down 41.3 points.

Wednesday:Down 79.98 points.

Thursday:Up 13.14 points.

Friday: Holiday or other weird event!

For the Week...

The Dow industrials were down 86.57 points or 0.5%.

The Nasdaq composite was down 22.15 points or 0.5%.

The S&P 500 index was down 13.64 points or 0.7%.

Year to Date...

Dow Industrials

0.8% down from the high of 17,648.94 on 03/22/2016.

13.4% up from the low of 15,450.56 on 01/20/2016.

Nasdaq

3.1% down from the high of 4,926.73 on 01/05/2016.

13.4% up from the low of 4,209.76 on 02/11/2016.

S&P 500

1.0% down from the high of 2,056.60 on 03/22/2016.

12.5% up from the low of 1,810.10 on 02/11/2016.

Economic Reports

The following information is derived from yahoo!finance and sometimes Bloomberg.com with times local to the east coast.

Report

Time

A-FRating

Description

Personal consumption expenditures

8:30 M

C+

Covers durables, non-durables, and services.

Personal income & consumption

8:30 M

C+

Measures sources of income to predict future demand.

Consumer confidence

10:00 T

B-

Surveys 5,000 households for trends.

Crude inventories

10:30 W

?

My guess: Measures oil inventory.

Initial jobless claims

8:30 Th

C+

Counts people filing for state unemployment benefits.

Chicago purchasing managers index

9:45 Th

B

Monitors regional manufacturing activity.

4 Employment reports

8:30 F

A

Nonfarm payrolls, unemployment rate, avg workweek, hourly earnings.

Construction spending

10:00 F

D

Covers residential/non-residential/public spending on new construction.

Michigan sentiment

10:00 F

B-

Consumer sentiment: Measures strength of consumer spending.

Auto & truck sales

2:00 F

C-

Monthly sales of domestically produced vehicles.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 03/24/2016, the CPI had:

11 bearish patterns,

6 bullish patterns,

426 patterns waiting for breakout.

The CPI signal is 35.3%, which is
neutral (between 35% and 65%).

The chart pattern indicator is bearish
with 1 of 3 half triangles showing (). Additional triangles are a measure
of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, "Take a
two-dimensional approach." He offers these tips.

Index

S2

S1

Pivot

R1

R2

Dow Industrials (^DJI): Daily

17,359

17,437

17,477

17,556

17,595

Weekly

17,271

17,394

17,521

17,643

17,771

Monthly

15,627

16,571

17,110

18,054

18,593

S&P500 (^GSPC): Daily

2,018

2,027

2,031

2,040

2,045

Weekly

2,004

2,020

2,038

2,054

2,072

Monthly

1,829

1,932

1,995

2,098

2,160

Nasdaq (^IXIC): Daily

4,722

4,748

4,761

4,786

4,799

Weekly

4,680

4,727

4,781

4,828

4,882

Monthly

4,268

4,521

4,678

4,931

5,088

Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.

S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.

If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.

In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.

A move outside of daily R1 or S1 usually does not mean a breakout.

The odds suggest that the entire week's price action will remain between weekly R2 and S2.

Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.

Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3

First resistance level: R1 = (2 * P) - L

First support level: S1 = (2 * P) - H)

Second resistance level: R2 = P + (R1 - S1)

Second support level: S2 = P - (R1 - S1)

H = high price , L=low price, C=closing price

Consecutive Price Trends

Index

ConsecutiveCloses So Far

%

Comments

Dow industrials (^DJI)

1 week down

28.3%

The trend may continue.

2 months up

37.6%

The trend may continue.

S & P 500 (^GSPC)

1 week down

27.2%

The trend may continue.

1 month up

53.1%

Expect a random direction.

Nasdaq composite (^IXIC)

1 week down

28.7%

The trend may continue.

1 month up

47.2%

Expect a random direction.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indices, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly.
See 12-Month Moving Average for more details.

Dow Industrials: bearish.

Nasdaq Composite: bearish.

S&P 500 Index: bearish.

Dow Transports: bearish.

Dow Utilities: bullish.

Earnings, Chart Patterns & Industries

Earnings season is over.

Found

Chart Pattern Name

21

Flag, high and tight

9

Dead-cat bounce

8

Head-and-shoulders bottom

7

Double Bottom, Adam and Adam

6

Flag

5

Triangle, symmetrical

4

Broadening top

3

Double Top, Adam and Adam

3

Pennant

3

Pipe bottom

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example).
However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

The industries I follow were the best (rank 1) and worst performing.

This Week

Last Week

1. Electric Utility (West)

1. Electric Utility (West)

2. Semiconductor Cap Equip.

2. Semiconductor Cap Equip.

3. Electric Utility (Central)

3. Electric Utility (Central)

4. Electric Utility (East)

4. Electric Utility (East)

5. Household Products

5. Household Products

50. Information Services

50. Information Services

51. Short ETFs

51. Short ETFs

52. Homebuilding

52. Homebuilding

53. Electronics

53. Electronics

54. Shoe

54. Shoe

55. Drug

55. Drug

56. Biotechnology

56. Biotechnology

57. Retail (Special Lines)

57. Retail (Special Lines)

-- Thomas Bulkowski

Thursday 3/24/16. Intraday Market Direction: Nasdaq

The index dropped by -1.1% or -52.8 points. Since 02/05/1971 the index made 156 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 1.4% on 81 occasions.

Average loss was -1.4% on 75 occasions.

Expect the index to close higher 51.9% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 102/175 or 58.3% of the time.

The prediction of the index closing lower has been right 34/72 or 47.2% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

A trendline, drawn here in red, shows how the index broke below it. That's bad news. Or is it?

I show the measure as the vertical cyan bar at A reflected downward at B. Notice that A and B are about the same height. That's how the measure rule is supposed to work.

Now that the index hit the measure rule target, what comes next? The chart pattern indicator flipped to bearish today, suggesting more of a downward move is coming.

I also see that in the stocks I follow. They are rounding over and look poised to fall. So that's my guess for Thursday's close (a lower close).

If I'm wrong, look for the index to climb back to 4825, potentially forming a double top.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Wednesday 3/23/16. A Look At Indicators

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

The chart shows the indicator taking a dive even as the index moves higher. This is bearish divergence and it suggests the market will drop, following the indicator lower.

When that will happen, if it does happen, is unknown.

The red line is the percentage of stocks at least 20% below their 1-year high (plotted upside down). The blue line is the average percentage drop of stocks below their 1-year high (plotted upside down).

Shown as a red line on the above chart...

On Monday, 45% of stocks in my database are in bear market territory (down at least 20% from their 1-year high).

A week ago, it was 48%.

The fewest was 19% on 04/15/2015.

And the most was 70% on 02/11/2016.

Shown as a blue line on the above chart...

The 540 stocks in my database are down an average of 22% from their yearly high.

A week ago, the average was 23%.

The peak was 12% on 04/15/2015.

And the bottom was 32% on 02/11/2016.

With the advance in the markets over the last nearly two months, the majority of stocks that I follow have continued to recover.

Both metrics cited above have improved over the last week.

-- Thomas Bulkowski

Tuesday 3/22/16. Intraday Market Direction: Dow

The index climbed by 0.1% or 21.57 points. Since 10/01/1928 the index made 1278 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.6% on 656 occasions.

Average loss was -0.6% on 622 occasions.

Expect the index to close higher 51.3% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 110/184 or 59.8% of the time.

The prediction of the index closing lower has been right 29/57 or 50.9% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

I hope I'm wrong about what I'm going to write because I want my portfolio of stocks to hit their sell targets. I want to take profit on some utility stocks that have doubled or triple in price
since I bought them (I'm not kidding). But if not, then I'll just sit collecting a 4-5.5% dividend. That's not a bad return for holding stocks in the best performing index this year (up 14%).

The top one at A can be argued that the second bottom touch isn't really flat with the first touch. That's true but it's close enough, I think.

If you can imagine the chart without the red lines, it looks tired, like it's struggling to move higher. If an index can't climb then it's going to tumble. That's a good saying to follow.

Look at pattern B. It shares many of the characteristics of A.

Look at what happened to the index last Tuesday (at C). The index plunged to the bottom of the pattern before rebounding. That could happen tomorrow (Tuesday).

The index could make a dramatic drop. What about if it doesn't?

It could continue higher, moseying higher. It could do both, of course. Touch the bottom red trendline and then fly.

My guess is that the index will drop tomorrow and remain below today's close. It just looks like that's what's going to happen.

Prove me wrong, Mr. Market, so I can sell some of my winners.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Monday 3/21/16. Anatomy of a Trade: HIG.

This is a chart of Hartford Financial Services Group (HIG), a stock I own.

Last Monday I discussed a round-trip trade in JC Penney. Today, I am going to show you a trade I made recently that had almost perfect timing.

My notes about the trade consist of just one line because at the time of purchase, I already owned the stock. This trade just added to an existing position.

That means I didn't have to go through researching the company or even going through my checklist. I just decided to buy the stock and did.

On January 22, 2016, I was shopping for stocks. I find it's a lot easier to know when a stock I own is oversold (low) than a stock I don't own.

That was the case with this stock. I felt that the downward move (part of which is shown) was overdone (it peaked at 50.95 in mid August 2015), so I decided to buy at the market open. I bought 500 shares and received
a fill at 38.78. That happened at A, just two days after the stock bottomed.

My notes say I was concerned about the timing of the February 4 earnings release. The market reacted to the news the next day (B).

Usually I won't buy a stock within three weeks of an earnings announcement, but I made an exception in this case. Why? I don't know. Clearly with new positions, I won't buy the stock but with existing positions, I'm more willing to ride out an earnings release since I'm familiar with the stock and have more confidence in it.

I still own the stock, but on these shares, I've made $3,675 as of the last close shown on the chart.

Friday 3/18/16. Pattern Trading Setups for the Weekend.

The following patterns were found manually, so the results may differ from those found using Patternz.

There were 15 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 644 stocks searched, or 2.3%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.

I found 1 pipe bottom chart patterns, which is neutral. High numbers of pipe bottoms can signal a bullish move (I see many of them just before a bear market ends or during a bear market rally. Often it means the first bottom of a double bottom has formed. Thus, expect a move down to the second bottom).

Excluding ETFs, there were 5 bullish chart patterns this week and 3 bearish ones with any remaining (7) being undecided.
The ratio of bullish to bearish patterns suggests the market is hinting of a coming bullish (up) turn.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

Thursday 3/17/16. Intraday Market Direction: Nasdaq

The index climbed by 0.7% or 35.3 points. Since 02/05/1971 the index made 386 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.7% on 241 occasions.

Average loss was -0.8% on 145 occasions.

Expect the index to close higher 62.4% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 101/174 or 58.0% of the time.

The prediction of the index closing lower has been right 34/72 or 47.2% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

Not much is going on in this picture. I drew the red line connecting bottoms but slicing through the dip last Thursday. The cyan line connects the peaks. Both form an up-sloping
channel.

If you believe the index will bounce between the two channel lines, then more of a climb remains until it hits the top of the channel.

If you think the index is rounding over now, showing weakness, then look for it to drop to the red line.

The size and sign of the Dow futures before the stock market opens could tell which line gets touched on Thursday.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Wednesday 3/16/16. A Look At Indicators

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

The two red lines are signs of bearish divergence between the indicator and the index.

That suggests the uptrend that has been in place for a month now is ready to reverse.

The red line is the percentage of stocks at least 20% below their 1-year high (plotted upside down). The blue line is the average percentage drop of stocks below their 1-year high (plotted upside down).

Shown as a red line on the above chart...

On Monday, 48% of stocks in my database are in bear market territory (down at least 20% from their 1-year high).

A week ago, it was 48%.

The fewest was 19% on 04/15/2015.

And the most was 70% on 02/11/2016.

Shown as a blue line on the above chart...

The 541 stocks in my database are down an average of 23% from their yearly high.

A week ago, the average was 23%.

The peak was 12% on 04/15/2015.

And the bottom was 32% on 02/11/2016.

The above numbers, compared to a week ago, show that no progress has been made in the past week. If a stock cannot climb, that means weakness and a coming decline.

So both this chart and the prior one mean the market is going to turn. When it'll turn is the question. It could gather strength and resume the upward move. That's happened before but it's rare.
So I'm looking for a retrace of the prior upward move.

-- Thomas Bulkowski

Tuesday 3/15/16. Steps for a HTF Trade

This post is for and Mark, Christina, and especially Morgan Dodd and Beverly O'Keeffe

Let's pretend I want to buy a stock showing one. How would I analyze the trade?

First, we have to find a HTF. If you have the right software, it's easy enough to do (I wrote my own. Sorry you can't have it because I'd have to write an instruction manual). Just look for
price to double within two months.

Of course, that only finds the flagpole. You have to wait for a flag to develop.

Let's suppose I found a potential HTF in Atwood Oceanics (ATW). What now?

This is a chart of ATW as of Friday's (3/11) close.

The low at A is 4.82 on February 3, and the high at B is 10.79 on March 4. From the low to the high, the climb is (10.79 - 4.82)/4.82 or 124%. I look for moves of at least 90%.

The two dates, February 3 and March 4 are within the two month maximum for price to double (or nearly so), so this qualifies as a potential high and tight flag.

The stock has retraced to C, forming a flag. All we have to do is wait for the stock to climb above the flagpole.

Here's where it gets tricky.

Confirmation for a high and tight flag happens when the stock closes above the highest price in the chart pattern. Often that's the top of the flagpole, as in this case (B).
If a pattern does not confirm, then you do not have a HTF.

I know from experience that buying a HTF before confirmation is a recipe for disaster. A study I did found that 14% never confirm (price dropped so far
that it closed below the bottom of the flagpole, below A in this case). Ouch.

So you'll want to either use a conditional order for price to close above B and buy at the open the next day, or use a buy stop a penny above B. Conditional orders are a pain to
use, so I often just use a buy stop. I'd place it at 10.83, above B (10.79) and above the round number 10.80. You want to give the stock every opportunity to reverse before you buy it.

An updated study found the failure rate to be 19%. A full 34% failed to see price rise at least 10% (that is, 19% + 15% = 34% for the 5% and 10% failure rates),
but those apply to both bull and bear markets. Bull market failures are fewer: 6% and 10% for the 5% and 10% failure rates, respectively (meaning 16% of them fail to rise at least 10%).

Before I went any further, I would check out the company to see what its potential for the continuation of the upward move would be.

The CEO bought 10,000 shares in February. If insiders are buying, that is good news. When you lose your shirt on a trade, they can share your pain.

On this stock, the analysts are mostly positive on the stock. I pay most attention to S&P, Credit Suisse, and Ford. Almost half the analysts (7 of 13) have a buy on the stock.

The company has four floating rigs coming off contract this year, so that's bad news. For this year, 66% of their rigs are contracted out. Next year will likely see more idle rigs. The price
of oil going forward is unknown, but companies like this one will continue to suffer for this year and probably next.

In mid February, they eliminated the dividend.

As of March 11, Ford said that the 68.5% rise in the stock is very negative. Combined with a very negative rating for the year (price down 67.6%) but positive for the quarter (price down 28.7%),
they rate the stock a hold with "very negative" price movement. I did a study of their method and wrote about it here.

The discussion of price reminds me of the chart shown at the link. I show that chart here, but the performance figures remain at the link.

What we have with this stock is a steep downward price trend leading to a HTF recovery (the upper right quadrant). As the chart shows, a steep downtrend is a bad combination. HTFs with that
combination of steep downtrends leading to the HTF result in almost 40% worse performance than the best combination (that is, a 22% average post-breakout rise versus 36% for the shallow upward move
leading to the HTF).

I discovered this after the last bear market. I saw many HTFs that saw price double within the HTF but then they reversed soon after the breakout (or even before).
That could be what will happen here. Or not.

So far we've found a HTF and checked out the company. What's next?

I'd go through my checklist, which my computer provides with the click of a button. Among the important items are these.

Position size, both for this trade and the max size for the portfolio (for multiple buys so any one position isn't too big)

Next earnings date (I won't buy within three weeks of an earnings announcement)

How does the chart look on the weekly scale?

How is the industry doing? (A count of stocks trending up or down over 1, 2 and 6 months)

Is the stock outperforming the index? (such as the Dow Industrials)

HTF Target

If the stock works as we hope, how far can we expect the stock to rise?

I reproduce the chart of ATW here so you don't hurt yourself paging back and forth.

You can get an estimate by using the height of the chart pattern. In this case, it's the height of the flagpole from A to B, or 10.79 - 4.82 or 5.97.

Add that to the top of the pattern, B in this case, to get a target of 16.76. You can also add the height to the bottom of the flag (if the flag has made a bottom). This will give
you a more conservative target.

The study for my Encyclopedia book (the one shown above) said HTFs reach their target 90% of the time. We can leave the target at 16.76 or multiply it by 90% to get a more conservative value: 16.76 x 0.90 = 15.08.

Now look at the chart. I drew two red lines showing overhead resistance, D. I would expect the stock to climb to this price and struggle. It might climb just 10% or 15% or it could
rise all the way to 18 (the top red line) and keep going until it passed out from oxygen deprivation. But the 15 to 18 range would be my target.

If it got there, I'd wait to see how it performed.

Is It a Buy?

Would I buy this stock? No.

Why not?

Several reasons. First, The chart showing the four trend combinations reminds me of what happened to HTFs after the last bear market. I'd be worried that will happen again.

HTFs tend to see price rise by 10% to 15% and then die. That's been the type of market in the last two years, where long trends are hard to come by. I'd be concerned that as soon as I
buy a HTF, price will reverse.

Lastly, I don't buy stocks I discuss here. That would be like buying first, promoting it here, and then selling it. I'd never do that.

I read the disclosure statement of one blog that said they promoted such trades and were compensated $250,000 for the trouble. Wow. That's more than I make in a week!

Anyway, this is the process I go through for each trade in which I already don't own a position.

-- Thomas Bulkowski

Monday 3/14/16. Anatomy of a Trade

This is a trade I made recently, but this has been happening a lot to me in the last year or two.

I looked at JC Penney (JCP) as a turnaround situation.

Based on the volatility of the market, the stock, how far down from the yearly high the market is, and my portfolio size, my computer recommended that I not buy more than $23,000
of the stock. But as a first chunk, it recommended 2,400 shares worth about $17,500.

I went through my checklist including the date of the next earnings report (about 1.5 months away. The danger zone is 3 weeks or less), location of overhead resistance (at 9, 10),
and a review of the company fundamentals, including business prospects going forward (Translation: I read analyst reports on this stuff).

My computer recommended a stop 10% below the anticipated purchase price, at 6.52 but I felt 6.47 would work better. That would place a stop below the bottoms in December (A) and January (B).
Those bottoms could act as support just like they did at A and B.

The AB pattern is a double bottom, but on this size chart, it looks flattened. The pattern becomes a valid one when the stock closes above the peak between
the two bottoms. I show that as line C.

My sell target for this trade was 10.

I bought the stock on January 13 and received a fill at 7.34 on 2,400 shares.

As the chart shows, the stock sold off over the next few days.

When it dropped below the bottom of the chart pattern, I sold the stock and received a fill at 6.43.

When I try to bottom fish (pick stocks near the bottom of their yearly trading range), I'm often early into the trade. Sometimes I ride out the drop and sometimes not.

With uncertainty about how the company's turnaround was unfolding, I didn't want to ride this down to bankruptcy. So I sold.

That's often the smart choice. The chart pattern didn't act as I expected, so I got out.

Friday 3/11/16. Pattern Trading Setups for the Weekend.

The following patterns were found manually, so the results may differ from those found using Patternz.

There were 19 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 644 stocks searched, or 3.0%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.

Excluding ETFs, there were 13 bullish chart patterns this week and 5 bearish ones with any remaining (1) being undecided.
The ratio of bullish to bearish patterns suggests the market is hinting of a coming bullish (up) turn.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

Depending on how you draw the top trendline, the index appears to have moved and closed above the top trendline, signaling an upward breakout.

That suggests a resumption of the upward move.

Not shown, but one could argue that there's a head-and-shoulders bottom chart pattern formed in the last two days. That pattern has confirmed as a valid one (that is, the
index has closed above the neckline).

The index could drop, of course. I would expect to see support at 4640, where the index found support Tuesday and Wednesday (yesterday and today).

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Wednesday 3/9/16. A Look At Indicators

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

Notice that the indicator has plummeted. It suggests that this retrace will have legs. Maybe not since today's dip is blamed on weakness in China.

The red line is the percentage of stocks at least 20% below their 1-year high (plotted upside down). The blue line is the average percentage drop of stocks below their 1-year high (plotted upside down).

Shown as a red line on the above chart...

On Monday, 48% of stocks in my database are in bear market territory (down at least 20% from their 1-year high).

A week ago, it was 56%.

The fewest was 19% on 04/15/2015.

And the most was 70% on 02/11/2016.

Shown as a blue line on the above chart...

The 541 stocks in my database are down an average of 23% from their yearly high.

A week ago, the average was 27%.

The peak was 12% on 04/15/2015.

And the bottom was 32% on 02/11/2016.

The above information says that the general market is making a recovery.

$ $ $

My above remarks are short, intentionally. I want to share the kind of day I had.

It started in the morning, after breakfast when I went to the bathroom. Flushing the toilet, it became plugged. That happens frequently with this 1.6 gallon flush toilet despite cleaning
out the jets (small holes on the bowl's rim and one in the bottom of the bowl).

I took my plunger and tried to free the blockage without success. That was unusual. I went to my other toilet and flushed that one only to find that it started leaking at the floor.

Uh-oh. Two toilets were not working. That told me the plug might be a sewer break. I had my foundation lifted a few inches recently, so the sewer pipe could have snapped anywhere along the line.

I went downstairs to my third toilet and used a bucket of water to flush this one (I keep the water shut off). That flushing created a syphon that sucked some of the water from the upstairs toilets.

That told me it wasn't a sewer blockage as I feared but a normal plug. More upstairs flushing and plunger work freed the blockage. But that didn't explain why the second toilet was
leaking at the floor line.

A flush there told me that it was leaking higher, at the joint between the reservoir and the bowl. I thought that after 30 years, the gasket needed to be replaced.

While thinking about that, storms blew through (tornado in a nearby county). Winds up to 70 mph tore off my neighbors skylight. It bounced off the opposite side of his roof and landed in his front yard, undamaged.

With me, it blew off about a dozen shingle tabs (the bottom 1/2 of the shingle).

After the hail, rain, and wind calmed down, I returned to the upstairs toilet. I tore it apart and bought a new gasket. That didn't work. It still leaked at the same place. Another trip to Home
Depot where I bought a complete set of new internals (new flapper system and so on). I replaced everything but the hose leading to the toilet.

I spent a few hours, spanning lunch, to remove the old stuff and install the new toilet guts only to find that the hose leading to the toilet was now leaking. Another HD trip where I bought a hose,
that was too small. Sigh. Another trip. I replaced the hose and turned on the water only to find that it leaking once again at the original joint. Jeepers.

I put that aside and climbed up on my roof and replaced the dozen or so shingle tabs.

When I started doing this years ago, I would remove the entire shingle by sliding a spade shovel under the shingle and popping up the nails on the one above the damaged shingle. That allowed
me to insert the new shingle and nail the new one in place.

Now I just find the broken tab on the grass (or wherever it lands) and glue it down by sliding the top end under the old shingle and gluing the rest down.

It works. I saves my knuckles and gluing down the tabs keeps the shingles intact for longer (my 15 year shingles have lasted 30 years but will be replaced this year. Cost? About $8k for a new roof, but that's a guess.

Anyway, I fixed the roof and returned to the toilet.

I used a screwdriver to tighten up the two screws that hold the reservoir to the bowl. That appears to have worked. So far.

We'll have to see if it stays dry or not.

Along the way, I discovered that the heavy downpour that morning left big puddles on three upstairs windowsills (but the downstairs windows were dry. Go figure.
Fortunately, I sponged up the water and don't think any leaked on the sheet rock.

So I'm exhausted now, and I still have to make dinner. Maybe default to frozen pizza accompanied by romaine salad and spinach. Simple and quick. Or just salad. Healthier that way.

More storms are due to roll in soon. Time to go.

-- Thomas Bulkowski

Tuesday 3/8/16. Intraday Market Direction: Dow

The index climbed by 0.4% or 67.18 points. Since 10/01/1928 the index made 1045 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.6% on 549 occasions.

Average loss was -0.6% on 496 occasions.

Expect the index to close higher 52.5% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 109/182 or 59.9% of the time.

The prediction of the index closing lower has been right 29/57 or 50.9% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

A rising wedge occurs when both trendlines slope upward (shown here in red) with the bottom trendline having a steeper slope. The two trendlines join at the triangle's apex sometime in the future.

In this case, I think it says the markets are getting tired of rising. I also see that in the daily readings from the chart pattern indicator. Today's chart (on my computer) shows the line turning lower.

That tells me the index is about to retrace. Maybe not, but that's how I'm leaning.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.

Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3

First resistance level: R1 = (2 * P) - L

First support level: S1 = (2 * P) - H)

Second resistance level: R2 = P + (R1 - S1)

Second support level: S2 = P - (R1 - S1)

H = high price , L=low price, C=closing price

Consecutive Price Trends

Index

ConsecutiveCloses So Far

%

Comments

Dow industrials (^DJI)

3 weeks up

21.1%

Expect a reversal soon.

2 months up

37.6%

The trend may continue.

S & P 500 (^GSPC)

3 weeks up

21.5%

Expect a reversal soon.

1 month up

53.1%

Expect a random direction.

Nasdaq composite (^IXIC)

3 weeks up

23.5%

Expect a reversal soon.

1 month up

47.2%

Expect a random direction.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indices, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly.
See 12-Month Moving Average for more details.

Dow Industrials: bearish.

Nasdaq Composite: bearish.

S&P 500 Index: bearish.

Dow Transports: bearish.

Dow Utilities: bullish.

Earnings, Chart Patterns & Industries

Earnings season is over.

Found

Chart Pattern Name

35

Double Bottom, Adam and Adam

33

Head-and-shoulders bottom

31

Pipe bottom

20

Dead-cat bounce

10

Double Bottom, Adam and Eve

10

Big W

9

Triple bottom

8

Triangle, symmetrical

8

Flag, high and tight

5

Double Bottom, Eve and Adam

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example).
However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

Friday 3/4/16. Pattern Trading Setups for the Weekend.

The following patterns were found manually, so the results may differ from those found using Patternz.

There were 19 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 647 stocks searched, or 2.9%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.

I found 1 pipe bottom chart patterns, which is neutral. High numbers of pipe bottoms can signal a bullish move (I see many of them just before a bear market ends or during a bear market rally. Often it means the first bottom of a double bottom has formed. Thus, expect a move down to the second bottom).

Excluding ETFs, there were 12 bullish chart patterns this week and 5 bearish ones with any remaining (2) being undecided.
The ratio of bullish to bearish patterns suggests the market is hinting of a coming bullish (up) turn.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

The index broke out upward from this pattern. It suggests to me that the index will throwback to the top of the pattern before a resumption of the upward move.

Since this isn't on the daily chart, performance is worse (less reliable), I think.

I guess we'll have to see how tomorrow's (Thursday's) trading plays out. We've been in an uptrend for a week now. Maybe it's time for a rest. That could suggest the index reverses and keeps going down.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Wednesday 3/2/16. A Look At Indicators

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

The index keeps rising and the indicator is at or near its high.

That is good news for bulls. However, all good things must come to an end, so look for a retrace.

I'm not saying it'll happen tomorrow, but it will happen sooner or later.

The red line is the percentage of stocks at least 20% below their 1-year high (plotted upside down). The blue line is the average percentage drop of stocks below their 1-year high (plotted upside down).

Shown as a red line on the above chart...

On Monday, 56% of stocks in my database are in bear market territory (down at least 20% from their 1-year high).

A week ago, it was 58%.

The fewest was 19% on 04/15/2015.

And the most was 69% on 02/11/2016.

Shown as a blue line on the above chart...

The 544 stocks in my database are down an average of 27% from their yearly high.

A week ago, the average was 27%.

The peak was 12% on 04/15/2015.

And the bottom was 32% on 02/11/2016.

The indicator confirms that the market is recovering.

Compare the above statistics with a week ago. Fewer stocks are 20% or more below their highs. That's good news. However, the average of 27% below their high hasn't changed this week.

-- Thomas Bulkowski

Tuesday 3/1/16. Intraday Market Direction: Dow

The index dropped by -0.7% or -123.47 points. Since 10/01/1928 the index made 561 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.7% on 274 occasions.

Average loss was -0.9% on 287 occasions.

Expect the index to close lower 51.2% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 109/182 or 59.9% of the time.

The prediction of the index closing lower has been right 29/56 or 51.8% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

The horizontal lines are ones of support (below the current price) and resistance (the black one).

I drew the horizontal red line from the current low to the left. You'll notice that the index pushed up threw the line a week ago then found support in the blue circle.

On the way back up, the index hit resistance just above the blue congestion area, at the green circle.

The support and resistance areas don't work well intraday, clearly not as well as they do on the daily or weekly charts. Knowing that, we can theorize that the index is resting on support
here. If it drops, it has three nearby areas (green, blue, red line) that should support the index well enough that it turns upward. The index might drop at the open and turn higher the
rest of the day.

If the index drops, it could rise to the black line, recovering what it lost today (Monday).

I suppose that something could happen overnight which scares the market. That means it could tumble 300 points to 16,200. That's the launch price where the up move began last Wednesday.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.